Thailand Floods To Impact Several Product Segments in 2012
Posted on 09. Nov, 2011 by Randy Giusto in Consumer Electronics, Mobile, Technology
Monsoon rains and run-off that flooded more than 1,000 factories across central Thailand has left the hard disk drive (HDD) industry reeling, as well as the brands that depend on those components. While some research firms have estimated that consumers could see an increase of at least 10 percent in the price of external hard drives over the next quarter, at Vantis we have heard that those price increases could be from 30 to 50 percent, and more immediate.
Major Disruption
Thailand alone supplies over 60% of worldwide hard disk drive (HDD) component supply, and 50% of assembly capacity. Even drives assembled elsewhere depend on Thai-produced parts including casings, sliders, rocker arms, and other critical parts. The largest brand names in storage all have significant presence in Thailand. Western Digital and Toshiba are the most impacted with major flooding at their facilities, while Seagate and Hitachi GST have been shut down due to supply chain constraints. Seagates plant remained on dry ground throughout the crisis, but it’s suppliers were flooded. IntriPlex Thailand, based in Ayutthaya and supplies HDD components, had six feet of water throughout its complex. Obviously way too many eggs have been placed into the Thai basket as far as the HDD market is concerned.
PC OEMs obviously will be the hardest hit as HDDs are still the predominant means of storage in desktop and notebook platforms, although SSD-based solutions are increasing in popularity in notebook platforms. Product roadmaps for new desktop and notebook designs will clearly be impacted in 2012, and brands are now reassessing their options and realigning their strategic planning efforts to match the shortages ahead.
Seagate stands to make the most out of the crisis by gaining market share at the expense of Western Digital. Because Seagate’s facility remained on dry ground, it will not have to make the major investments in capital equipment that WD and others will be facing. We expect Seagate to increase its market share for both branded external HDDs sold at retail as well as OEM HDDs used in a variety of technology platforms.
But not just PCs are impacted. HDDs are used in digital A/V components, digital imaging systems, and digital video recorders (DVRs). This crisis will impact cable and satellite TV providers worldwide as well who will be switching out their existing DVR and STB inventories to new units in conjunction with the rolling out of new services in 2012.
Also impacted will be in-car navigation systems and car manufacturers overall, especially as 2012 models roll out. Many new models are increasingly using HDD solutions for storage instead of DVD or Flash, or a combination of HDD and Flash as the amount of in-vehicle data required in today’s autos is rising and requiring larger storage capacity solutions. Toyota has already decreased auto production at many of its factories globally, followed by Honda.
For Consumers, Buy Now!
The HDD shortage is expected to run through 2012 meaning consumers should buy now any remaining external hard drives on retailer’s shelves. Prices are expected to keep rising through the holiday season on external hard drives of all sizes including the extremely popular portable designs. These shortages will also increase the bill of materials or BOM costs of notebook and desktops and any technology product that sports a hard disk drive for data storage. Whether brands will maintain existing product pricing or pass the increased HDD costs on to consumers due to higher BOM costs remains to be seen. At Ipsos Vantis we expect that a weak economy will limit the price increases of finished goods with HDDs in them, but that branded HDDs at retail will rise.
The Upside for SSD and Ultrabooks
Flash or SSD-based consumer electronics products are expected to be marketed even more heavily in 2012 by both brands and the channel. Brands will skew their development efforts even more in this direction, defocusing PCs even more, unless they are SSD-based designs. Ipsos Vantis expects that the acceleration towards SSD-based PC solutions, especially in the notebook space will increase 3X due to the HDD shortage over the coming year. We are already seeing this from a new product planning perspective with several brands.
The crisis is good news for brands building new Ultrabook solutions based on Intel’s reference platform. Ultrabook sales so far have been rather slow out of the gate according to comments from Acer and Asus. Many more PC and consumer electronics brands will be bringing their ultrabook solutions to market in early 2012.
We also expect Apple to now accelerate the transition of its MacBook line to SSD, on the success of its MacBook Air line but also due to impact on other PC OEMs with HDD-based solutions in 2012. Apple is clearly in a competitive position, with its ability to command a higher ASP from consumers, that it can transition to all SSD more quickly.
Furthermore, reductions in Flash or SSD drive pricing will also accelerate the marketing efforts and hopefully sales of post-PC solutions such as tablets, smartphones, and accessories that exclusively use Flash for both local storage and syncing to the cloud for a variety of services.
It is clear that the Thailand Floods have crippled an already unstable hard disk drive industry that runs on razor thin margins to begin with. For brands looking to accelerate beyond HDD solution, the time may be now. By accelerating Flash and SSD-based product solution they will be able to keep both consumers and enterprise buyers interested in new product designs and new services in 2012.
The flooding doesn’t bode well for HDD manufacturers with a major presence in Thailand going forwards, as many are expected to reman there. The country’s ministry expects additional flooding over the next few years, simply because Thailand’s infrastructure is not built to withstand runoff volumes and rainfall amounts of this magnitude.
- Randy Giusto
SVP, Innovation Research and Industry Analyst
508.254.7975
TWEETS FROM IPSOS VANTIS
THE INNOVATOR’S DAILY
Twitter
Google Plus
Facebook
